The Financial Express (Delhi Edition)
China will own the Internet of Cars
China’s edge starts with its market. With 24.6 million cars sold in 2015, it’s the biggest in the world. And because the typical Chinese car buyer is young and permanently connected, that scale is also a crucial driver of innovation
Afew weeks ago, Apple’s Tim Cook was all smiles as he stepped into a sedan operated by Didi Chuxing. Apple had just invested $1 billion in the ridesharing company, and Cook was no doubt feeling satisfied. But he was probably feeling another emotion too: relief at getting a piece of China’s “internet of vehicles” before it’s too late.
That phrase might be new, but the idea isn’t. Automakers and technology companies have long dreamed of building internet-connected cars that can entertain passengers, coordinate with other vehicles, navigate themselves and, eventually, drive autonomously. Platforms such as Apple’s CarPlay and Google’s Android Auto are starting to make the concept a reality.
But China is where the future of
this technology will likely be charted. And in trying to compete there, foreign companies are facing a stark choice: Partner up or be left behind.
China’s edge starts with its market. With 24.6 million cars sold in 2015, it’s the biggest in the world. And because the typical Chinese car buyer is young and permanently connected, that scale is also a crucial driver of innovation. According to a 2015 McKinsey survey, 60% of Chinese new car buyers would switch brands if it meant improved connectivity.
That’s a major opportunity, which Chinese companies are seizing. Baidu, the search-engine giant, has persuaded a collection of automakers representing about a third of domestic sales to use CarLife, its answer to CarPlay, in models made for China. Baidu’s grip on these companies—including Hyundai, BMW, MercedesBenz, Ford, Audi and Volkswagen— will be hard to dislodge.
Even if Baidu wasn’t locking down the big manufacturers, Apple and Google would be in a tough spot. Google Maps, a key navigational component of Android Auto, is inaccessible or inconsistent in much of China. Regulators shut down Apple’s iBooks and iTunes movies in April. Although CarPlay wasn’t affected, would-be car buyers surely got the hint.
And that’s precisely what China’s government wants. Last year, it inaugurated the “Made in China 2025” initiative, an effort to transform the country into an innovation hub. The idea is to support domestic companies working on certain technologies in the hope that they’ll become global leaders. Planning documents even targeted specific market shares: One said that Chinese companies should own 80% of the domestic market for vehicle entertainment modules by 2030,
and 100% of the market for satellite navigation systems. To pull that off, the government wants companies to collaborate in creating an “ecosystem” for connected cars, akin to an operating system like iOS or Android. This might mean fierce competitors working together, such as when rival ridesharing apps merged to create Didi Chuxing last year. Or it might mean new businesses entirely, such as Baidu’s joint venture with an insurer to create usage-based auto insurance.
For foreign car makers, the danger is that this ecosystem will lock their products out of China. A more alarming possibility is that as China’s auto industry expands overseas—notably to Africa and Southeast Asia—the ecosystem will follow, potentially shutting competitors out of other markets too.
It’s not all hopeless for Apple and Google, of course. Millions of Chinese who already use iOS and Android products will surely want their dashboard counterparts. Foreign makers of automotive equipment, such as Pioneer, have found their own route into China’s internetof vehicles.AndApple,bytaking a stake in Didi, is buying itself a seat at the table when the company chooses its technology platforms.
But aspiring connected-car companies should recognise that China’s internet giants have prospered partly because the government shielded them from competition. Unless foreign competitors get creative, they’re likely to get locked out of the internet of vehicles too. And that would be a shame—for them and for the drivers of the future. Bloomberg